Good values, Inc. is all equity-financed. the total market value of the firm currently is $100000 and
Question:
Good values, Inc. is all equity-financed. the total market value of the firm currently is $100000 and there are $2000 shares outstanding.
a. The firm has declared a $5 per share dividend. The stock will go ex-dividend tomorrow. At what price will the stock sell today? Ignore taxes.
b. Now assume that the federal marginal tax rate is 26% and the provincial marginal tax rate is 13.39%, the federal dividend tax credit is 13.33% of the grossed-up dividend, and the provincial dividend tax credit is 5.1% of the grossed-up dividend. The applicable gross-up for dividend tax credit is 25%. What is the dividend tax rate?
c. Using your result for the dividend tax rate from part (b) and assuming a capital gains tax rate of zero, at what price will the stock sell today?